Blackgold International Holdings (ASX Code: BGG) is a Chongqing, China-based producer of high value thermal coal predominantly sold for industrial power generation to power plant customers in Shanghai.
BGG this week delivered a profit from ordinary activities of $21.7 million for the six months ended 30 April 2014.
The company currently owns four existing underground thermal coal mines, the Caotang Mine and the Heiwan Mine in Fengjie Country, Chongqing, the Baolong Mine in Wushan County, Chongqing and the Changhong Mine.
James Tong, Non-Executive Chairman, discusses the results with Proactive Investors.
James, Blackgold delivered a profit from ordinary activities of $21.7 million for the six months ended 30 April 2014 in difficult conditions for coal companies. How has Blackgold remained profitable during this time?
Blackgold operates in Chongqing, an inner land region in China.
There had been a shifting of manufacturing activities from the coastal area to inland area where the cost of production is cheaper for the past few years.
Chongqing’s own coal production is unable to meet the demand for coal.
Blackgold thus benefited from its geographical location where demand for coal is more than its supply. Being the largest privately operated coal mining company in Chongqing, Blackgold is well reputed and established within the region.
This makes the demand for Blackgold’s product relatively healthy, despite the current market condition.
Also, the two operating mines, Caotang and Heiwan, are located close to the river. This provides a transportation cost which is very competitive.
With all these advantages, it is no wonder that Blackgold can still achieve a decent profit despite the uncertain market conditions.
Currently what is the demand for Blackgold product, and do you have forecasts for the short to medium term?
We can’t tell how the market is moving at this moment. But we will observe the market constantly and make adjustment to suit the ever-changing market condition.
We will adjust our production plan and manage our cost accordingly as well.
In the new lower priced coal environment, what advantages does Blackgold have with logistics infrastructure?
We had a fleet of barges with approximately 40,000 tonnes of transportation capacity.
This will enable us to fulfil the transportation needs to our customers. Any coal sold by us can be guaranteed that it will be delivered with the very competitive cost.
Considering the experience and funding connections of the Blackgold board, will it look to take advantage of any acquisition opportunities in the current market?
We are still looking at acquiring new mines. The mines are going for a lower price as the coal price drops, and they look like good investments at their current valuation.
But our priority will be to maintain our Group’s cashflow.
At the same time, we are also actively working with some parties to fund our acquisitions. If the funds come in at a reasonable rate, we will acquire.
Finally, Blackgold was considering a dual-listing. Is this still a goal of the company in the future?
We will review the coal sector capital markets and prepare the company for the next growth wave of coal mining in the regional market.
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